Review of Industrial Organization 18: 45–52, 2001.
© 2001 Kluwer Academic Publishers. Printed in the Netherlands.
Beyond Illinois Brick: The Law and Economics of
Cost Pass-Through in the ADM Price Fixing Case
RONALD COTTERILL, LEONARD EGAN and WILLIAM BUCKHOLD
U-21, Food Marketing Policy Center, University of Connecticut, Storrs, CT 06269-4021, U.S.A.
Abstract. This article reviews the legal standards and the economics of pass-through to indirect
purchasers and illustrates these principles with a case involving ADM in the market for high fructose
corn syrup (HFCS). With three assumptions about production technologies, buyers of HFCS experi-
ence a 100 percent pass through of the direct overcharge. The extent of pass through of the increase
by buyers is shown to depend critically upon the market structure of the purchasing industry and the
shape of the retail demand curve. Flexible demand functional forms are needed to avoid constraining
estimated pass through rates.
Key words: High fructose corn syrup, Illinois Brick, indirect overcharges, pass-through of injuries,
I. Legal Views on Indirect Purchases
Under federal law only parties that are directly affected have the right to sue for
antitrust injury and recover damages. However, under several states’ antitrust laws
indirect parties, such as consumers in the ADM price ﬁxing cases, can sue for anti-
trust injury and damages. In the latter case the extent to which input cost increases
(due to the antitrust violation) at the direct purchaser level are passed through to
indirect purchasers is a critical issue. Here we present a synopsis of the relevant law
and an economic model in the context of the ADM price ﬁxing case for analyzing
whether a cost increase due to price ﬁxing in an input market is passed on by direct
purchasers to intermediaries and ultimately to consumers.
Prior to the late 1960s the issue of whether anyone other than the ﬁrst-level
purchaser from a member of a horizontal price-ﬁxing conspiracy could recover
Presented in an Industrial Organization Society session, American Economic Association an-
nual meeting, New York City, January 3, 1999. William Buckhold and Leonard Egan are attorneys
in Washington, D.C. Ronald Cotterill is Director, Food Marketing Policy Center, University of
Connecticut, Storrs, CT. Mr. Egan and Buckhold are counsel to plaintiffs in class action lawsuits
in Michigan, Kansas and the District of Columbia. Class certiﬁcation was denied in Michigan and
granted in the District of Columbia. The issue pends in Kansas. Dr. Cotterill gave expert testimony on
behalf of the plaintiffs in all the cases. This is Scientiﬁc Contribution No. 1870, Storrs Agricultural
Experiment Station, Storrs, CT 06269.